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LAW

ON STATE ENTERPRISES

(No.14/2003/QH11 of November 26, 2003)

Pursuant to 1992 Constitution of the Socialist Republic of Vietnam, which was amended and supplemented under Resolution No.51/2001/QH10 of December 25, 2001 of the 10th National Assembly, the 10th session;

This Law prescribes the State enterprises.

Chapter I

GENERAL PROVISIONS

Article 1. State enterprises

State enterprises are economic organizations where the State owns the entire charter capital or holds dominant shares or contributed capital, which are organized in the form of State companies, joint-stock companies or limited liability companies.

Article 2. Scope of regulation and subjects of application

1. The regulation scope of this Law shall cover:

a) The prescription of the establishment, reorganization, dissolution, ownership conversion, organization of management and operation of State companies;

b) Regulation of relationships between the owner being the State and the representative of the State's contributed capital portions at enterprises where the State owns the entire charter capital or enterprises where the State holds dominant shares or contributed capital.

2. The subjects of application of this Law shall include:

a) The State companies;

b) The representatives of the State's contributed capital portions at State-run joint-stock companies, one-member State-run limited liability companies, State-run limited liability with two or more members;

c) The representatives of the State's contributed capital portions at enterprises where the State holds dominant shares or contributed capital.

For representatives of the State's contributed capital portions at enterprises where exists a portion of State capital, the Government's regulations shall be complied with;

d) For special State companies in direct service of defense and/or security, the provisions of this Law and the Government's specific regulations shall be complied with.

Article 3. Term interpretation

In this Law, the terms and phrases below shall be construed as follows:

1. State companies are enterprises where the State owns the entire charter capital, which are set up, organizationally managed and operationally registered under the provisions of this Law. The State companies shall be organized in form of independent State companies, State corporations.

2. The State-run joint-stock companies are shareholding companies where all shareholders are State companies or organizations authorized by the State to contribute capital, which are organized and operate under the provisions of the Enterprise Law.

3. The State-run one-member limited liability companies are limited liability companies where the State owns the entire charter capital, which are organizationally managed and operationally registered under the provisions of the Enterprise Law.

4. The State-run limited liability companies with two or more members are limited liability companies where all members are State companies or where some members are State companies while other members are organizations authorized by the State to contribute capital, which are organized and operate under the provisions of the Enterprise Law.

5. Enterprises with dominant shares or contributed capital of the State are enterprises where the State's shares or contributed capital account for more than 50% of the charter capital and the State holds the dominant powers over such enterprises.

6. Enterprises with a portion of the State's capital are enterprises where the State's contributed capital portions account for 50% of the charter capital or less.

7. State companies holding the dominant powers over other enterprises are companies which own the entire charter capital or have shares or contributed capital accounting for more than 50% of the charter capital of other enterprises, holding the dominant powers over such enterprises.

8. The dominant powers over enterprises mean the powers to decide on operation charters, appointment, relief from duty, dismissal of key managerial titles, on managerial organization and other important management decisions of such enterprises.

9. Independent State companies are State companies which do not belong to the organizational structure of State corporations.

10. Charter capital of State companies means the capital amounts invested by the State in the companies and inscribed in the companies' charters.

11. Legal capital means the minimum capital amount required for the establishment of enterprises in a number of production and business lines according to the provisions of law.

12. Public-utility products and services are products and services essential for the life, economy and social affairs of the country, population communities of a territorial region or ensuring defense and security, and the costs of production and provision thereof under the market mechanism can hardly be covered by enterprises producing these products or providing such services; hence, the State shall order, assign plans on, or bid for, the production and/or provision thereof at prices or charges prescribed by the State.

Article 4. Application of the Law on State Enterprises and other relevant laws.

1. State companies operate under this Law and other relevant laws. In case of disparity between the provisions of this Law and those of relevant laws on the same issue falling under the scope of regulation and subjects of application of the relevant laws, the provisions of such laws shall apply.

2. In cases of disparity between the provisions of this Law and those of relevant laws on the rights and obligations of owner being the State over the State companies or the provisions on the relations between the owner being the State and the persons authorized to represent the State's contributed capital, or the disparity between this Law and the Enterprise Law, the Law on Foreign Investment in Vietnam or laws corresponding to enterprises with the State capital, the provisions of this Law shall apply.

Article 5. Political organizations and socio-political organizations in the State enterprises

The political organizations and socio-political organizations in the State enterprises shall operate within the framework of the Constitution, laws and their own charters in accordance with the provisions of law.

Chapter II

ESTABLISHMENT AND BUSINESS REGISTRATION OF STATE ENTERPRISES

Article 6. Branches, domains, geographical areas, where new State companies can be established

1. New State enterprises can be established in the following branches, domains or geographical areas:

a) Branches and domains which supply essential products and services for the society;

b) Branches or domains where high technologies are applied, creating motive forces for fast development of other branches and domains as well as the entire economy, requiring big investments;

c) Branches and domains with high competitive edges;

d) Geographical areas being under exceptionally difficult socio-economic conditions, where other economic sectors do not invest in.

2. Branches, domains and geographical areas defined in Clause 1 of this Article and plannings on reorganization and development of State companies according to branches, domains or geographical areas shall be decided and periodically publicized by the Government.

Article 7. Proposing the establishment of new State companies

1. The ministers, the heads of ministerial-level agencies, the heads of Government-attached agencies, the presidents of the People's Committees of the provinces or centrally-run cities (hereinafter called the provincial-level People's Committee presidents) shall be the persons who propose the establishment of new State companies (hereinafter called the proposers).

2. The proposers must base on the lists of branches, domains and geographical areas to be considered for establishment of new companies as prescribed in Article 6 of this Law and the plannings on reorganization and development of State companies within the whole national economy, branches, provinces and centrally-run cities, which have been already approved by the Government according to the provisions at Point a, Clause 1,

Article 65 of this Law, to elaborate schemes and dossiers for establishment of new State companies and submit them to the Prime Minister for decision as provided for in Article 9 of this Law.

3. The schemes on establishment of new State companies must contain the following principal contents:

a) The necessity to set up the companies; lists of products and/or services to be provided by the companies; the market situation, market demands and prospect for each type of products, services provided by the companies; the capability to consume the companies' products and/or services and the feasibility studies on competitiveness of the companies' products and/or services;

b) Locations for the companies' headquarters or locations for construction of production and/or business establishments and the land areas under use;

c) The capability to provide labor, raw materials, materials, energy and other necessary conditions for the companies to operate after they are set up;

d) The projected total investment capital; the initial investment capital sources of the State; sources and forms of mobilization of the remaining capital amounts; schemes for repayment of mobilized capital; demands and measures to create working capital for the companies;

e) The socio-economic efficiency feasibility study and the compatibility of the establishment of companies with the plannings, strategies for development of branches, domains and economic regions;

f) The report on environmental impact assessment and measures for environmental protection;

g) The projected organizational and managerial model for the companies and operation duration;

h) For companies which need to invest in the construction upon their establishment, the establishment schemes must also include projects on investment in the establishment. The contents of projects on investment in establishment of new State companies shall comply with the legislation on investment.

4. The dossiers on establishment of new State companies shall each include:

a) The report proposing the establishment of company;

b) The scheme on establishment of new company prescribed in Clause 3 of this Article;

c) The draft charter of the company;

d) The written application for land assignment or land lease;

e) The written application for investment preferences as prescribed by legislation on investment promotion (if any).

5. The company's charter must at least contain the following contents:

a) The names, addresses, head-office, telephone numbers, fax numbers, email of the company, branches, representative offices (if any);

b) Business objectives and lines;

c) The charter capital;

d) The relationship between the company and the agency or organization authorized to be representative of the company's owner;

e) The company's organizational and managerial structure;

f) The company's representative at law;

g) The principles on use of the company's profits;

h) Cases of reorganization, dissolution, ownership conversion and procedures for liquidation of the company's assets;

i) The procedures for amendment, supplementation of the company's charter;

j) Other regulations which are decided by the agency or organization authorized to be representative of the company's owner but must not contravene law provisions.

Article 8. Conditions for establishment of new State companies

The decisions to establish new State companies must be based on the following conditions:

1. Having valid dossiers as provided for in Clause 4, Article 7 of this Law;

2. Satisfying all conditions on capital; charter capital level in conformity with production and business lines which require legal capital;

3. The companies draft charters must not contravene the provisions of this Law and other law provisions;

4. The schemes on establishment of new companies must ensure the feasibility, efficiency, satisfaction of requirements on advanced technologies prescribed by the State for branches, domains or geographical areas where new companies can be set up, the conformity with the State's strategies and plannings on socio-economic development, the State's regulations on environmental protection and other law provisions.

Article 9. Competence to decide on the establishment of new State companies

1. The Prime Minister shall decide on the establishment of State companies of particular importance, which dominate key branches and domains and act as core in boosting the economic growth and make great contributions to the State budget.

2. The ministers, the heads of ministerial-level agencies, the heads of Government-attached agencies and the presidents of the provincial-level People's Committees shall decide on the establishment of new State companies other than the subjects defined in Clause 1 of this Article.

3. The persons who decide on the establishment of new State companies must set up Appraisal Councils to appraise the schemes on establishment of new State companies. The scheme-appraising councils are the advisory bodies for the persons who decide on the company establishment; the establishment deciders bear responsibility for their decisions to set up new State companies.

4. The decisions to set up new State companies concurrently serve as the decisions on investment projects for establishment of State companies. The newly established State companies are owners of these projects.

5. The appraisal of investment projects on establishment of State companies and the execution of investment projects shall comply with the provisions of the legislation on investment.

6. When deciding on the establishment of new companies, the establishment deciders must concurrently proceed with the appointment of the chairman and other members of the Managing Boards; decide to appoint or sign contracts with directors of the companies having no Managing Board.

Article 10. Business registration of State companies

The procedures for business registration of State companies are prescribed as follows:

1. Within sixty days as from the date of obtaining the establishment decisions, the companies must register their business at the business registries according to the provisions of the Enterprise Law;

2. The State companies shall have their legal person status as from the dates they are granted business registration certificates. Only after being granted business registration certificates can the companies receive investment capital from the State budget or mobilize capital for investment in construction of enterprises and business activities; the companies may be engaged in conditional production and business lines when being granted by competent State bodies permits for doing business in conditional branches, crafts or meeting all business conditions as provided for by law;

3. The announcement of business registration contents, changes in business registration contents, the supply of information on business registration contents shall comply with the provisions of the Enterprise Law.

Article 11. Establishment and business registration of new State-run joint-stock companies, State-run one-member limited liability companies, State-run limited liability companies with two or more members

1. The following subjects shall be the founding members of new State-run joint-stock companies, State-run one-member limited liability companies, State-run limited liability companies with two or more members:

a) Corporations with investment and establishment decided by the State;

b) Corporations making investment with, and dealing in, the State capital;

c) State companies holding dominant powers over other enterprises;

d) Independent cost-accounting member companies of State corporations;

e) Independent State companies;

f) Economic organizations entitled to use the State capital for investment in their business according to law provisions.

2. Founding members contributing capital to the establishment of new State joint-stock companies, State-run one-member limited liability companies, State-run limited liability companies with two or more members outside the branches, domains and geographical areas prescribed in Article 6 of this Law must have their schemes on capital contribution to establishment of new companies approved by competent authorities. Founding members being enterprises set up by decisions of any authorities shall propose such authorities to approve the capital contribution schemes. Founding members being member enterprises of corporations shall have their capital contribution schemes approved by the Managing Boards of the corporations.

3. The procedures for business registration of State-run joint-stock companies, State-run one-member limited liability companies, State-run limited liability companies with two or more members shall comply with the provisions of the Enterprise Law.

Chapter III

RIGHTS AND OBLIGATIONS OF STATE COMPANIES

Article 12. Capital and assets of State companies

1. The companies' capital shall include capital invested in the companies by the State, capital mobilized by the companies themselves and other capital sources as provided for by law.

2. The State's capital invested in the companies shall include State budget capital and accumulated capital added to the State capital.

3. The land use right value calculated into capital of the companies according to the provisions of land legislation. The Government shall guide in detail the determination of land use right value, methods of calculating and including the land use right value into the capital according to land use purposes and the particularity of branches, lines and domains of operation of each type of State companies.

4. The State companies' assets shall include fixed assets and liquid assets.

Article 13. Rights of State companies over capital and assets

1. To possess, use the companies' capital and assets for business, achievement of legitimate benefits from capital and assets of the companies.

2. To dispose of the companies' capital and assets according to the provisions of this Law and other relevant law provisions.

3. To use and manage assets being land and/or natural resources, which are assigned or leased by the State according to the provisions of legislation on land, natural resources.

4. The State shall not regulate the State's capital invested in the companies and the capital and assets of the companies by mode of non-payment, except for cases of deciding to reorganize the companies or realizing the objectives of providing public-utility products and/or services.

Article 14. The State companies' obligations towards capital and assets

1. To preserve and develop the State capital and capital mobilized by the companies themselves, to take self-responsibility for the debts and other property obligations of the companies within their assets.

2. The representatives of owners being the State are responsible for the debts and other property obligations of the companies within the capital amounts invested in the companies by the State.

3. To periodically re-evaluate the companies' assets according to the Government's regulations.

Article 15. Business rights of State companies

1. To take initiative in organizing their production and business, to organize their managerial apparatuses according to business requirements and ensure efficiency in business.

2. To do business in production and business lines not banned by law; to expand business scale according to capability of the companies and demands of domestic and overseas markets.

3. To look for domestic and overseas markets, customers and sign contracts.

4. To decide by themselves the purchase prices and sale prices of products and services, except for public-utility products and/or services as well as products and/or services priced by the State, which shall comply with the price levels or brackets set by the State.

5. To decide on investment projects according to the provisions of legislation on investment; to use capital and assets of the companies for joint venture or cooperation with, or capital contribution to, other enterprises in the country; to hire or purchase part or whole of other companies.

6. To use capital of the companies or mobilized capital for investment in the establishment of State-run one-member limited liability companies; to invest together with other investors in the establishment of joint-stock companies or limited liability companies with two or more members.

7. To open branches and/or representative offices at home and abroad.

8. To formulate and apply labor and materials norms, wage unit prices and other expenses on the basis of ensuring the efficiency of companies' business and the compliance with law provisions.

9. To recruit, hire, arrange, employ, train, discipline, sack laborers, to select forms of wage and bonus payment suitable to business requirements and have other rights as prescribed by labor legislation.

10. To have other business rights according to the market demands and in compliance with the provisions of law.

Article 16. Business obligations of State companies

1. To conduct business strictly according to the registered production and business lines; ensure the quality of products and services provided by the companies according to the registered standards.

2. To renew or modernize their technologies and managerial modes in order to raise the efficiency and competitiveness.

3. To ensure the rights and interests of laborers according to labor legislation, to ensure the laborers' rights to participate in the management of companies as provided for in Section 3, Chapter IV of this Law.

4. To comply with the State's regulations on defense, security, culture, social order and safety, natural resource and environment protection.

5. To observe the regimes of book-keeping, audit and financial statements, statistical reports according to law provisions and at requests of owners being the State.

6. To submit to the supervision and inspection by owners being the State; to abide by the inspection decisions of finance bodies and competent State agencies according to law provisions.

7. To be answerable to the capital investors for the use of capital for investment in the establishment of other enterprises.

8. To fulfill other obligations in business according to law provisions.

Article 17. The financial rights of State companies

1. To mobilize capital for business in forms of issuing bonds, credit bills, promissory notes; borrowing capital of banks, credit institutions and other financial organizations, of individuals and organizations outside the companies; borrowing capital of laborers, and other forms of capital mobilization under the provisions of law.

The mobilization of capital for business shall comply with the principles of self-responsibility for debt repayment, assurance of efficiency in the use of mobilized capital and non-alteration of the form of ownership of the companies.

In cases where companies mobilize capital for ownership conversion, the provisions in Chapter VIII of this Law and other law provisions shall be complied with.

The mobilization of capital of foreign individuals and organizations shall comply with the Government's regulations on management of foreign loans.

2. To take initiative in using capital for business activities of the companies; to use and manage funds of the companies according to law provisions.

3. To decide on amortization of fixed assets according to the principles that the minimum amortization level must ensure to cover the tangible wear-out and intangible depreciation of fixed assets and shall not be lower than the minimum amortization rates prescribed by the Government.

4. To enjoy allowance and/or price subsidy regimes or other preferential regimes of the State when performing the tasks of public-utility, defense, security, natural calamity prevention and combat or the provision of products and/or services according to the State’s price policy and failing to offset the production costs of these products and/or services of the companies.

5. To be entitled to pay rewards for technical, managerial and/or technological renewal or innovations; rewards for higher labor productivity; rewards for material and cost saving. These rewards shall be accounted as business costs on the basis of ensuring the companies’ business efficiency brought about by such technical, managerial and/or technological renewal or innovations, higher labor productivity and/or materials and cost savings.

6. To enjoy investment and/or reinvestment preference regimes as prescribed by law.

7. To reject and denounce all requests for the supply of resources, which are not prescribed by law, of any individuals, agencies or organizations, except for voluntary contributions for humanitarian and public-utility purposes.

8. After fulfilling their tax obligations, transferring losses according to the provisions of the Law on Enterprise Income Tax and fulfilling other financial obligations under law provisions, making deductions for setting up financial reserve funds, the remaining profits shall be divided according to sources of capital invested by the State and sources of capital mobilized by the companies themselves as follows:

a) The profits divided according to the State’s investment capital sources shall be used for reinvestment to increase the State capital at the companies or to formulate concentrated funds for investment in other State enterprises in domains which the State needs to develop or to control according to the Government’s regulations;

b) The profits divided according to sources of capital mobilized by the companies themselves shall be deducted for setting up the development investment funds according to the Government’s regulations; the remainder shall be channeled into reward funds and welfare funds by the companies themselves.

Where the companies have payable due debts, which have not yet been fully repaid, they may raise wages and make deductions for rewards to the companies employees, including managers, only after they fully repay such due debts.

The distribution of after-tax profits into development investment funds, reward funds and welfare funds by State companies operating in the State-monopolized domains, newly set up State companies shall comply with the Government’s regulations.

Article 18. Financial obligations of the State companies

1. To conduct business with profits, to ensure the ratio of profit to the capital invested by the State and assigned by the owner’s representatives; to register, declare and pay tax fully; to fulfill obligations toward the owner and other financial obligations under the provisions of law.

2. To manage and use with efficiency the business capital, including capital portions invested in other companies (if any), natural resources, land and other resources, which are assigned or leased by the State.

3. To use capital and other resources for performance of other special tasks when so requested by the State.

4. To fully comply with the regimes of management of capital, assets, funds, regimes of accounting and audit according to law provisions; to be accountable for the honesty and legality of their financial activities.

5. To observe the regimes of annual financial statement, financial publicity and supply of necessary information for truthful assessment of the efficiency of the companies’ operation.

Article 19. Rights and obligations of State companies when participating in public-utility activities

Apart from the rights and obligations of the State companies, which are prescribed in Articles 13, 14, 15, 16, 17 and 18 of this Law, the State companies, when participating in public-utility activities, shall have the following rights and obligations:

1. To produce and/or provide public-utility products and/or services on the basis of bidding. For public-utility activities carried out on orders placed, or under plans assigned, by the State, the companies are obliged to sell public-utility products and/or provide public-utility services to the right subjects, at the prices and charge levels set by the State;

2. To take responsibility before the State for their public-utility activities; take responsibility before customers and before law for the public-utility products and/or services provided by the companies;

3. To be considered for additional investment corresponding to the assigned public-utility tasks; to account and have their reasonable expenses for public-utility activities covered and ensure the laborers’ interests according to the following principles:

a) For products and/or services provided by mode of bidding, the companies shall themselves cover the expenses according to the bid prices;

b) For public-utility products and/or services, which cannot be implemented by mode of bidding but on orders placed by the State, the companies may use charges or turnovers from the provision of products and/or services on the orders placed by the State to cover up reasonable expenses in service of public-utility activities and ensure interests for laborers. In cases where the revenues are not enough to make up for the reasonable expenses, the difference shall be provided by the State budget and the laborers’ satisfactory interests shall be ensured.

4. To formulate and apply spending norms, wage unit prices within the bid prices, the cost estimates according to the orders placed or the plans assigned by the State;

5. To fulfill other tasks and obligations of the State companies according to the provisions of this Law;

6. For companies which are designed, established with investment and make business registration for the achievement of key, regular and stable objectives of providing public-utility products and/or services,

a) They shall be invested by the State with capital for formation of assets in service of the objectives of providing public-utility products and/or services;

b) When necessary, the State shall transfer the capital portion and assets in service of the objectives of providing public-utility products and/or services of the companies for the achievement of the objectives of providing public-utility products and/or services in other companies;

c) They are entitled to transfer, lease, mortgage assets in service of the objectives of providing public-utility products and/or services, which are under the companies’ management, when so permitted by the persons who decide the establishment of the companies. The mortgage of land use right value and/or the companies’ assets associated with the rights to use land in service of the objectives of providing public-utility products and/or services shall comply with the provisions of the land legislation;

d) They are entitled to use the assigned resources for organization of additional business activities when so agreed upon by the persons who decide the establishment of the companies, but without affecting the achievement of the principal objectives of providing public-utility products and/or services of the companies;

e) They shall perform other tasks and obligations of the companies participating in public-utility activities according to the provisions of this Law.

The Government shall prescribe branches and domains with public-utility products and/or services; guide in detail the mechanism for bidding, order placement, plan assignment, financial mechanism and accounting for public-utility activities.

Article 20. Rights and obligations of the State companies holding dominant powers over other enterprises

Apart from the rights and obligations of the State companies prescribed in Articles 13, 14, 15, 16, 17, 18 and 19 of this Law, the State companies holding dominant powers over other enterprises shall also have the rights and obligations prescribed in Articles 57, 58 and 59 of this Law.

Chapter IV

STATE COMPANY-MANAGING ORGANIZATIONS

Article 21. Models of State company-managing organizations

1. The State companies are organized and managed after the model of having or having no Managing Boards. The following State corporations and independent State companies shall have Managing Boards:

a) Corporations with investment and establishment decided by the State;

b) Corporation making investment with, and dealing in, the State capital;

c) Independent State companies with large capital, holding dominant powers over other enterprises.

2. Based on the characteristics and sizes of State companies, the persons who decide the establishment of the companies shall decide on the organizational and managerial structures of the companies defined in Clause 1 of this Article.

Section 1

STATE COMPANIES HAVING NO MANAGING BOARDS

Article 22. Managerial organizations of the State companies having no Managing Board

State companies having no Managing Boards shall each have a managerial structure comprising the director, deputy-directors, chief accountant and assisting apparatus.

Article 23. Directors, deputy-directors, chief accountants and assisting apparatuses

1. Directors are the companies’ administrators and representatives at law and take responsibility before the persons who appoint them, the persons who sign contracts to hire them and before law for the performance of assigned tasks and delegated powers.

2. Deputy-directors shall assist their directors in administering the companies under the directors assignment and authorization, be answerable to the directors and law for the assigned or authorized tasks.

3. The chief accountants shall have the tasks to organize the book-keeping work of the companies; assist the directors in supervising the finance at the companies according to legislation on finance, accountancy; take responsibility before the directors and law for their assigned or authorized tasks.

4. The companies offices, bureaus, professional boards shall function to advise and assist the directors, deputy-directors in managing and administering affairs.

Article 24. Criteria and conditions for selection of directors

1. Criteria and conditions for selection of directors

a) Having capability for business and organization of management of the companies; having university degree, having profession in the main business domains of the companies; having at least three years’ experiences in managing and/or administering enterprises in the main production and business lines of the companies;

b) Having good health, good moral quality, being honest and not self-seeking; having knowledge about law and sense of law observance; having permanent residence in Vietnam.

2. The following subjects shall not be selected for appointment to be, or signing contracts to act as, directors:

a) Persons who once acted as directors of State companies, but breached the disciplines and were demoted, removed from position, or who let the companies fall into the state prescribed at Point a, Clause 3, Article 25 of this Law;

b) Persons who are banned from assuming posts of managing or administering enterprises as provided for by law.

Article 25. Selection, appointment and dismissal of, signing and, termination of contracts with, directors, deputy-directors, chief accountants

1. Persons who decide on the establishment of companies shall decide on the selection for appointment and the dismissal of, the signing and termination of contracts with, directors of State companies; decide on the appointment and dismissal of, the signing and termination of contracts with, deputy-directors and chief accountants of the State companies at the proposals of the directors.

2. The procedures for selection and appointment of, the signing of contracts with directors shall comply with the Prime Minister’s regulations. Directors shall be appointed or sign contracts for a duration of not more than five years and may be re-appointed or renew their contracts.

3. Directors shall be subject to removal from office or termination of contracts ahead of time in the following cases:

a) They have let the companies suffer from losses for two consecutive years or fail to achieve the ratio of profits to the State’s investment capital for two consecutive years or fall into the irremediable state of interwoven losses and profits, except for cases of loss or reduction of ratio of profits to the State’s investment capital, which have been approved by competent authorities; losses or reduction of ratio of profit to the State’s investment capital with objective reasons explained and approved by competent State bodies; investment in expansion of production, technological renewal;

b) The companies fall into the state of bankruptcy, but they fail to submit applications for bankruptcy;

c) They fail to fulfill the tasks or norms assigned by the persons who have appointed or selected them or fail to fulfill their contractual obligations;

d) They are dishonest in performing their tasks and exercising their powers or abuse their positions and powers to seek profits for themselves or for other persons; untruthfully report on the financial situation of the companies;

e) They are sentenced by courts with legally effective judgements or decisions;

f) They have lost their civil act capacity or have restricted civil act capacity.

4. The directors shall be replaced in the following cases:

a) They apply for resignation;

b) They are transferred to, or arranged with, other jobs under decisions.

Article 26. Tasks and powers of the directors

The directors shall have the following tasks and powers:

1. To receive and efficiently use the capital invested by the State and assets, land, natural resources as well as other resources assigned, lent or leased by the State;

2. To formulate development strategies and long-term plans of the companies, projects for investment, joint-ventures as well as schemes on managerial organizations of the companies for submission to the persons who decide the establishment of the companies;

3. To decide on investment projects, contracts on sale of assets valued at up to 30% of the total remaining assets on the companies’ accounting books or smaller the percentages prescribed at the companies’ charters; borrowing, lending, renting or leasing contracts and other economic contracts prescribed by the companies’ charters, but not exceeding the companies’ charter capital;

4. To administer the companies’ operation; to organize the realization of development strategies, business plans, investment projects, decisions of owners as provided for in Articles 64, 65, 66 and 67 of this Law; to represent the companies in signing and directing the implementation of economic and civil contracts;

5. To promulgate techno-economic norms, product standards and wage unit prices applicable within the companies in accordance with the State’s regulations;

6. To submit to the persons who decide on the establishment of the companies the selection for appointment or the dismissal of, or the signing or termination of contracts with, commendation or discipline of deputy directors, chief accountants;

7. To report to the persons who decide on the establishment of the companies and the finance agencies on the business and operation results of the companies;

8. To decide the selection of, signing or termination of contracts with, or appointment, dismissal, commendation or discipline of section heads and/or deputy-heads as well as persons holding equivalent titles in the companies, representatives of the companies’ capital portions contributed at other enterprises; to decide on wages and allowances for laborers in the companies, including officials under their appointing competence;

9. To submit to the inspection and supervisions by competent State bodies according to law provisions;

10. To enjoy the annual wage regime. The wage and bonus levels shall correspond to efficiency of the companies operation, which are decided by the persons who decide the appointment or prescribed in the signed contracts. Wages shall be advanced monthly and settled annually. The annual bonus shall be calculated on the basis of annual business results of the companies, with a part thereof being paid at the year-end and the remainder paid after the conclusion of their terms; particularly, the term-end bonus shall be calculated on the basis of that year’s results and the growth results of the whole terms;

11. To perform other tasks and powers, which are prescribed in the companies charters.

Article 27. Obligations and responsibilities of directors

1. To perform with honesty and responsibility the delegated powers and assigned tasks for the interests of the companies and the State; to organize the implementation of law at the companies.

2. Not to abuse their positions and powers, use the companies capital and assets to seek profits for themselves or other persons; not to disclose the companies secrets while assuming the responsibility of directors or within three years or other time limits prescribed by the companies charters after resigning from the director’s post.

3. To compensate for damage according to law provisions and the companies’ charters if breaching the companies charters, making decisions ultra vires, abusing their positions and powers, thus causing damage to the companies and the State.

4. When committing one of the following violations which are, however, not serious enough to be examined for penal liability, the directors shall not be entitled to bonuses, wage raising and shall be disciplined according to the seriousness of their violations:

a) Letting State companies suffer from losses;

b) Losing the State capital;

c) Deciding on inefficient investment projects, failing to recover investment capital;

d) Failing to ensure wages and other regimes for laborers in the companies according to the provisions of labor legislation;

e) Letting errors in capital and asset management, accounting and/or auditing regimes and other regimes prescribed by the State occur.

5. In case of letting the companies fall into the state prescribed at Point a, Clause 3, Article 25 of this Law, depending on the seriousness and consequences of their violations, they shall have their wages lowered and have to pay compensations according to law provisions.

6. When the companies fail to fully pay payable due debts and fail to fulfill other due material obligations,

a) They must report thereon to the persons who decide on the establishment of the companies and propose debt-repayment schemes;

b) Directors must not raise wages for, and deduct profits as bonus payment to, laborers and managerial officials;

c) They must bear personal responsibility for the damage caused to creditors by their failure to implement the regulations at Points a and b of this Clause;

d) They must propose measures to remedy the companies financial difficulties.

7. If their companies fall into the state of bankruptcy and they fail to submit the application for bankruptcy, the directors shall have to bear responsibility as provided for by law.

8. Those State companies subject to the reorganization, dissolution or ownership conversion but fail to carry out the procedures for reorganization, dissolution or ownership conversion, the companies’ directors shall be dismissed or have their contracts terminated ahead of time.

9. Directors may only hold managerial titles of limited liability companies, joint-stock companies or foreign-invested companies when they are nominated by State companies or competent organizations to be candidates for the managerial titles or designated to be the companies representatives regarding the capital portions contributed to such enterprises.

Wives or husbands, fathers, mothers, children, siblings of directors of the companies must not hold the title of chief accountant, cashier in the same companies. The companies’ economic, labor and/or civil contracts signed with the directors must be notified to the persons who appoint or sign contracts to hire the directors; where the persons who appoint or sign contracts to hire the directors detect that the contracts aim for self-seeking purposes and are not yet signed, they are entitled to request the directors not to sign such contracts; if such contracts were already signed, they shall be considered null and void, and the directors shall have to pay compensations for the damage caused to the companies and be handled according to law provisions.

Section 2

STATE COMPANIES HAVING MANAGING BOARDS

Article 28. Managerial structures of State corporations, independent State companies having Managing Boards

The managerial structures of State corporations or independent State companies with Managing Boards shall each comprise the Managing Board, the Control Board, the general director, the deputy general directors, the chief accountant and the assisting apparatus.

Article 29. The Managing Boards

The Managing Boards are the bodies directly representing the State owners at the State companies or independent State companies having Managing Boards, having the right to decide in the names of the companies on all matters related to the identification and achievement of the objectives, tasks and interests of the companies, except for matters falling under the owners’ competence and responsibilities decentralized to other agencies or organizations being owners’ representatives for implementation.

The Managing Boards must be accountable to the persons who decide on the establishment of State corporations, independent State companies having Managing Boards, to the appointers and law for all activities of the corporations, companies.

Article 30. Tasks and powers of the Managing Boards

1. To receive, manage and efficiently use capital, land, natural resources and other resources, which are invested in the companies by the State-owner.

2. To decide on the following matters:

a) Strategies, long-term plans, annual business plans, production and business lines of the companies and enterprises where the companies own the entire charter capital;

b) Investment projects, capital contribution, purchase of shares of other companies, sale of the companies assets valued at up to 50% of the total remaining asset value on the companies accounting books or other lower percentages prescribed in the companies charters; borrowing, lending, renting, leasing or other economic contracts in excess of the companies charter capital levels; or assign the general directors to decide thereon;

c) Schemes on management organization, business organizations, payroll and the use of managerial apparatuses, regulations on management of the companies, plannings, labor training; the establishment of branches, representative offices of the companies; the approval of the charters of State-run one-member limited liability companies with the companies being owners thereof;

d) Selection, signing of contracts or appointment, dismissal, demotion and wage levels of general directors after such is approved by the persons who decide on the establishment of the companies; the selection, signing of contracts or appointment, dismissal, demotion and wage levels of deputy-general directors as well as chief accountants at the proposals of the general directors; the adoption of the appointment, dismissal, demotion and wage levels of directors and chief accountants of member companies and non-business units, where the companies own the entire charter capital, for decision by the general directors; the selection, appointment, dismissal, demotion and wage levels of the chairmen and members of the Managing Boards of State-run one-member limited liability companies where the companies own the entire charter capital; the designation of representatives of the companies capital portions at other enterprises;

e) The performance of powers and tasks of owners of limited liability companies, joint-stock companies where the companies are owners or co-owners; the reception of enterprises which voluntarily join the member companies of corporations;

f) Investment and adjustment of capital and other resources invested by the companies between member units and the companies where they own the entire charter capital of according to such companies charters;

g) Schemes on capital mobilization for business operation but without alteration of ownership form, or authorization of the general directors to decide thereon;

h) The adoption of annual financial statements of the companies; schemes on the use of after-tax profits or the handling of losses in the business process at the proposal of the general directors; the adoption of annual financial statements of independent cost-accounting member companies of the corporations;

i) The inspection, supervision over the general directors, directors of member units in the performance of their functions and tasks prescribed by this Law;

j) The use of the companies capital for investment in the establishment of member units where the companies own the entire charter capital which shall, however, not exceed the investment capital levels which fall under the deciding competence of the Managing Boards, prescribed at Point b, Clause 2 of this Article; the dissolution, ownership conversion of these units.

3. To propose the persons who decide on the establishment of the companies:

a) To approve or amend the charters of the companies;

b) To decide on investment projects beyond the extent of decentralization to the Managing Boards and capital mobilization schemes, which lead to change of company ownership;

c) To add, replace, dismiss, commend and/or reward, discipline members of the Managing Boards of the companies;

d) To decide on investment projects, capital contribution to, and/or purchase of shares of, other companies, sale of the companies assets valued at over 50% of the total asset values left on the companies accounting books or other smaller percentages prescribed in the companies charters;

e) To decide on the use of the companies capital for investment in the establishment of member units where the companies own the entire charter capital in excess of the investment capital levels, which fall under the deciding competence of the Managing Boards as provided for at Point b, Clause 2 of this Article; to propose to the company establishment deciders for decision the dissolution or ownership conversion of these units.

5. Other powers and tasks as provided for by law and the companies charter.

Article 31. Criteria and conditions of the Managing Board members

The Managing Board members must fully satisfy the following criteria and conditions:

1. Being Vietnamese citizens permanently residing in Vietnam;

2. Having the university degree, managerial and business capability. The Managing Board chairmen must have at least three years experiences in management and administration of enterprises in the companies main production and business lines;

3. Having good health, good moral quality; being honest, incorruptible and knowledgeable; having good sense of law observance;

4. Not being the subjects banned from undertaking managerial and/or executive posts in the enterprises as provided for by law.

Article 32. Membership structure, appointment, removal from duty and replacement of Managing Board members

1. A Managing Board is composed of chairman and other members. The Managing Boards comprise full-time members and possibly part-time members. The Managing Board chairmen and the Control Board heads must be the full-time members. The general directors may be Managing Board members. The number of Managing Board members shall not exceed 7, which shall be decided by the company establishment decides.

2. The chairmen and members of the Managing Boards shall be appointed, removed from duty or replaced, commended, disciplined by the persons who decide on the establishment of the companies. The term of office of the Managing Board members shall not exceed five years. Managing Board members can be re-appointed.

3. Managing Board members shall be removed from duty in the following cases:

a) Being sentenced by courts with judgements or decisions, which have already taken legal effect;

b) Being incapable, unqualified to perform the assigned jobs; losing civil act capacity or having their civil act capacity restricted;

c) Being dishonest in the performance of tasks or exercise of powers or abusing positions and/or powers to seek benefits for themselves or other persons; untruthfully reporting on the companies’ financial situation;

d) Violating the provisions at Point a, Clause 3, Article 25 of this Law.

4. The Managing Board members shall be replaced in the following cases:

a) They apply for resignation;

b) They are transferred to, or arranged with, other jobs under decisions.

Article 33. The Managing Board chairmen

1. The Managing Board chairmen must not concurrently hold the post of general directors of the companies,

2. The Managing Board chairmen shall have the following powers and tasks:

a) To represent the Managing Boards in signing the reception of capital, land, natural resources and other resources invested in the companies by the State-owner; to manage the companies under the Managing Boards decisions;

b) To organize the research into development strategies, long-term plans, large-scale investment projects, organizational and staff renewal schemes for submission to the Managing Boards;

c) To work out programs and plans on operation of the Managing Boards; to decide on agenda and contents of meetings and documents in service of meetings; to convene and preside over meetings of the Managing Boards;

d) To sign on behalf of the Managing Boards resolutions, decisions of the Managing Boards;

e) To organize the monitoring and supervision of the implementation of resolutions and decisions of the Managing Boards; to suspend the general directors decisions which are contrary to resolutions and/or decisions of the Managing Boards;

f) Other powers decentralized or authorized by the Managing Boards or the persons who decide the establishment of the companies.

Article 34. Working regime of the Managing Boards

1. The Managing Boards work according to the regime of collectivism; meet at least once a quarter to consider and decide on matters falling within the ambit of their tasks and powers; for issues requiring no discussion, the Managing Boards may gather written opinions of the members. The Managing Board may hold extraordinary meetings to settle urgent issues of the companies at the proposal of the Managing Board chairmen, general directors or over 50% of the total number of the Managing Board members.

2. The Managing Board chairmen or Managing Board members authorized by the Managing Board chairmen shall convene and preside over meetings of the Managing Boards.

3. Meetings or gatherings of Managing Board members’ opinions shall be valid when they are participated by at least two-thirds of the total number of the Managing Board members. The Managing Boards’ resolutions and decisions shall be effective when they are voted for by over 50% of the total number of the Managing Board members; in cases where the number of votes for and the number of votes against are equal, the side with the vote of the Managing Board chairman shall be decisive. The Managing Board members are entitled to reserve their opinions.

When discussing the companies’ affairs which are related to important issues of any localities, the Managing Boards shall invite representatives of the relevant local administrations to attend the meetings; in cases where they are related to the interests and obligations of laborers in the companies, the representatives of the trade unions in the companies must be invited to attend the meetings. The representatives of agencies and organizations, who are invited to attend meetings, may state their opinions but shall not participate in voting.

4. The contents of issues under discussion, the stated opinions, the voting results, the decisions adopted by the Managing Boards and conclusions of the meetings of the Managing Boards must be recorded in writing. The meetings’ chairpersons and secretaries must jointly bear responsibility for the accuracy and truthfulness of the minutes of the Managing Boards’ meetings. The resolutions and decisions of the Managing Boards are binding on the entire companies.

5. The Managing Board members are entitled to request the general directors, chief accountants and/or managerial officials in the companies to supply information and documents on the financial situation and/or operation of the companies according to the information regulations prescribed by the Managing Boards or according to the Managing Boards’ resolutions. The persons requested to supply information must promptly, fully and accurately supply information and/or documents at the requests of Managing Board members, except otherwise decided by the Managing Boards.

6. The expenses for operations of the Managing Boards, including wages, allowances and remuneration, shall be accounted into the companies’ expenses for enterprise management.

Article 35. Regimes of wages, allowances, bonuses of full-time members and part-time members of the Managing Boards

1. The full-time members of the Managing Boards shall enjoy the regimes of annual wages and bonuses corresponding to the production and business results and efficiency of the companies.

The regime of payment and settlement of wages and bonuses for full-time members of the Managing Boards shall be the same as for the directors of the State companies prescribed in Clause 10, Article 26 of this Law.

2. The part-time members of the Managing Boards shall enjoy responsibility allowances and bonuses according to the mechanism applicable to the full-timers.

3. The Government shall guide the regimes of wages, bonuses and responsibility allowances of the Managing Board members.

Article 36. Conditions for chairmen and members of the Managing Boards, and general directors to participate in managing other companies

The Managing Board chairmen, the Managing Board members, the general directors may only hold managerial posts in limited liability companies, joint-stock companies or foreign-invested companies when they are nominated to the managerial posts or designated to be the companies’ representatives for the capital portions contributed to such enterprises, by their companies or competent State organizations.

Spouses, fathers, mothers, children and siblings of the Managing Board chairmen, the Managing Board members or the general directors of the companies must not hold the post of chief accountant or cashier at the same companies. The companies’ economic, labor and/or civil contracts signed with the Managing Board members, the general directors, with spouses, fathers, mothers, children or siblings of the Managing Board members or the general directors must be notified to the persons who have appointed such Managing Board members, general directors, or the persons who have signed contracts to hire such general directors; in cases where the persons who have appointed the Managing Board members, the general directors or the persons who have signed contracts to hire the general directors detect that the contracts aim for self-seeking purposes and are not yet signed, they may request the Managing Board members or the general directors not to sign such contracts; if the contracts have been already signed, they shall be considered null and void, the Managing Board members or the general directors must pay damages to the companies and be handled according to law provisions.

Article 37. The Control Board

1. The Managing Boards shall set up the Control Boards to assist them in inspecting and supervising the legality, accuracy and truthfulness in the management and administration of business activities, in accounting book recording, financial statements and the observance of the companies’ charters, the resolutions and decisions of the Managing Boards, decisions of the Managing Board chairmen.

2. The Control Boards shall perform the tasks assigned by the Managing Boards, report thereon to, and take responsibility therefore before, the Managing Boards.

3. A Control Board is composed of its head being a Managing Board member and a number of other members to be decided by the Managing Board. The Trade Union organization in a company shall nominate a representative who satisfies all criteria and conditions prescribed in Clause 4 of this Article to be member of the Control Board.

4. The Control Board members must fully satisfy the following criteria and conditions:

a) Permanently residing in Vietnam;

b) Having good health, good moral quality; being honest, incorruptible; having good sense of law observance;

c) Being proficient in economic, financial-accounting, auditing operations or professions;

d) The Control Board members work on a full-time basis and do not concurrently hold leading positions in the State apparatus;

e) Spouses, fathers, mothers, children or siblings of the Managing Board members must not hold the post of Managing Board member, general director, chief accountant or cashier in the same companies.

5. The expenses for operation of the Control Boards, including wages and working facilities, shall be ensured by the companies.

Article 38. General directors, deputy-general directors, chief accountants and assisting apparatuses

1. The general directors are the companies’ representatives at law, administering the daily activities of the companies according to objectives, plans and in accordance with the companies’ charters as well as resolutions and decisions of the Managing Boards; take responsibility before the Managing Boards and law for the exercise of their delegated powers and performance of their assigned tasks.

2. The deputy general directors shall assist their respective directors in administering the companies under the letter’s assignment and authorization; take responsibility before the general directors and before law for their assigned or authorized tasks.

3. The chief accountants have the tasks to organize the performance of the companies’ book-keeping work; assist the general directors in supervising the finance at the companies according to the legislation on finance and accountancy; take responsibility before the general directors and law for their assigned or authorized tasks.

4. The offices and professional bureaus and boards shall function to advise and assist the Managing Boards and the general directors in managing and administering affairs.

Article 39. Criteria and conditions for selection of general directors

The criteria and conditions for selection of general directors shall be the same as those applicable to directors, prescribed in Article 24 of this Law.

Article 40. Selection, appointment and dismissal of, signing and terminating contracts with, general directors, deputy-general directors, chief accountants

1. The general directors shall be selected, appointed, dismissed or have their labor contracts signed or terminated by the Managing Boards after they are approved by the persons who decide on the establishment of the companies.

2. The deputy general directors and chief accountants shall be selected, appointed, dismissed or have their labor contracts signed by the Managing Boards at the proposals of the general directors.

3. The general directors, deputy-general directors and chief accountants shall be appointed or sign contracts for a maximum duration of five years and may be re-appointed or renew their contracts.

4. The procedures for selection, appointment, dismissal of, or signing and terminating contracts with, the general directors shall comply with the Prime Minister’s regulations.

5. The general directors shall be relieved from duty or have their contracts terminated ahead of time in the cases prescribed in Clause 3, Article 25; shall be replaced under the provisions of Clause 4, Article 25 of this Law.

Article 41. Tasks and powers of the general directors

1. To elaborate the companies’ annual plans, capital mobilization schemes, investment projects, joint-venture schemes, managerial organization schemes, internal management regulations, labor training plannings, schemes on business coordination among member companies (if any) or with other companies for submission to the Managing Boards, the Managing Board chairmen.

2. To formulate techno-economic norms, product standards, wage price units in conformity with the State’s regulations and submit them to the Managing Boards for approval; to inspect the units in the companies in implementing the norms, standards and unit prices set within the companies.

3. To propose the Managing Boards to appoint, remove from duty, dismiss, sign and terminate contracts with, commend, discipline and decide the wage raising for, deputy general directors and chief accountants of the companies; to decide on designation of representatives of the companies’ contributed capital portions in other enterprises.

The directors and chief accountants of member companies and non-business units of the State corporations, where the corporations own the entire charter capital, shall be selected by the general directors for appointment or signing and terminating contracts after they are approved by the Managing Boards.

4. To decide on investment projects, asset purchase and sale contracts, borrowing, lending, renting, leasing and other economic contracts, sale and purchase prices of products and services of the companies according to the decentralization and authorization by the Managing Boards and the companies’ charters.

5. To sign civil and economic contracts according to the provisions at Point b, Clause 2, Article 30 of this Law as well as other economic and civil contracts according to the provisions of law.

6. To decide on selection of, signing and termination of contracts with, or appointment, dismissal, commendation, discipline of, on raising of wages and allowances for, the following titles:

a) Directors and chief accountants of the independent cost-accounting member companies and non-business units of the corporations after getting the Managing Boards’ approvals;

b) Heads of bureaus (boards), deputy-heads of bureaus (boards) of the corporations;

c) Deputy-directors of member companies and non-business units of corporations at the proposals of the directors of member companies and non-business units;

d) Other managerial titles in the companies as decentralized by the Managing Boards.

7. To organize the implementation of business plans, investment plans; to decide on market development, marketing and technological solutions; to administer activities of the companies with a view to realizing the resolutions and decisions of the Managing Boards.

8. To report to the Managing Boards on business results of the companies; to effect the publicity of financial statements according to the Government’s regulations.

9. To submit to the inspection and supervision by the Managing Boards, the Control Boards and competent State management bodies of the performance of the functions and tasks according to the provisions of this Law and other law provisions.

10. To apply necessary measures in case of urgency and to immediately report such to the Managing Boards and competent State agencies.

11. To enjoy annual wage regimes. The wage and bonus levels corresponding to the business efficiency of the companies shall be decided upon by the Managing Boards or comply with the signed contracts.

The regime of payment and settlement of wages and bonuses shall be the same as those applicable to directors according to the provisions of Clause 10, Article 26 of this Law.

12. Other powers and tasks as provided for by this Law, the companies’ charters and decisions of the Managing Boards.

Article 42. Relationships between the Managing Boards and the general directors in managing and administering the companies

1. Upon organizing the implementation of resolutions and decisions of the Managing Boards, if detecting matters not in favor of the companies, the general directors shall have to report them to the Managing Boards for consideration and adjustment of the resolutions and decisions. The Managing Boards must consider the proposals of the general directors. In cases where the Managing Boards do not readjust the resolutions and/or decisions, the general directors shall still have to implement them but are entitled to reserve their opinions and propose them to the persons who sign the decisions on establishment of the companies.

2. Within fifteen days as from the end of the months, quarters and years, the general directors must send the written reports on the business situation and implementation orientations of the companies in the following periods to the Managing Boards.

3. The Managing Board chairmen shall attend or appoint representatives of the Managing Boards to attend briefings, meetings in preparation for schemes for submission to the Managing Boards, which are presided over by the general directors. The chairmen or representatives of the Managing Boards attending the meetings may contribute their comments but have no right to make conclusions on the meetings. The general directors who are not Managing Board members shall be invited to attend meetings of the Managing Boards, may speak but have no right to vote.

4. The decentralization and authorization of the Managing Boards, the chairmen of the Managing Boards for the general directors as provided for in Articles 30, 33 and 41 of this Law must be recorded in the companies’ charters.

Article 43. Obligations and responsibilities of the chairmen and members of the Managing Boards, the general directors

1. The general directors take responsibility before the Managing Boards and law for running daily activities of their companies, for the performance of their delegated powers and assigned tasks. The Managing Board members must jointly bear responsibility before the persons who issue decisions on their appointment and before law for the decisions of the Managing Boards, the results and efficiency of their companies’ activities.

2. The Managing Board chairmen and members, the general directors shall have the obligations:

a) To exercise with honesty and responsibility the delegated powers and assigned tasks for the benefits of the companies and the State;

b) Not to abuse their positions and powers to use the companies’ capital and assets for the benefits of their own and other persons; not to give the companies’ assets to other persons; not to disclose the companies’ secrets while acting as Managing Board members or general directors and within at least three years or within the duration prescribed in the companies’ charters after resigning from the post of Managing Board member or general director, except for cases where so approved by the Managing Boards;

c) When the companies fail to fully repay payable due debts and other property obligations, the general directors shall have to report such to the Managing Boards, seek measures to overcome the financial difficulties and notify the companies’ financial situation to all creditors; the Managing Board chairmen and members as well as the general directors must not decide to raise wages, must not deduct profits to pay rewards to managerial officials and laborers;

d) To bear personal liabilities for the damage incurred by creditors if failing to implement the provisions at Point c of this Clause when the companies fail to fully repay the payable due debts and other property obligations;

e) To pay damage compensations according to the provisions of law and the companies’ charters if the Managing Board chairmen and/or members or the general directors violate the charters, make decisions ultra vires or abuse their positions or powers, thus causing damage to the companies and the State.

3. When committing violations in one of the following cases but not seriously enough to be examined for penal liability, the Managing Board chairmen and/or members, and the general directors shall not enjoy bonuses, wage raising and be disciplined, depending on the seriousness of their violations:

a) Letting their companies suffer losses;

b) Losing the State capital;

c) Deciding on inefficient investment projects, failing to retrieve investment capital, failing to repay debts;

d) Failing to ensure wages and other regimes for laborers in the companies according to the labor legislation;

e) Letting violations in the capital and asset management, the accounting, auditing or other regimes prescribed by the State be committed.

4. The Managing Board chairmen who show irresponsibility and fail to strictly comply with the provisions of Clause 2, Article 33 of this Law, thus leading to one of the violations prescribed in Clause 3 of this Article shall be removed from duty; and pay compensations for damage according to law provisions, depending on the seriousness and consequences of their violations.

5. In cases where they let their companies fall into the state prescribed at Point a, Clause 3, Article 25 of this Law, the Managing Board chairmen and the general directors shall have their wages lowered or be dismissed, depending on the seriousness and consequences of their violations, and at the same time have to pay compensations for damage according to law provisions.

6. If State companies fall into the state of bankruptcy while their general directors fail to file the applications for bankruptcy, they shall be removed from duty or have their contracts terminated and be held responsible as provided for by law; if the general directors fail to submit the applications while the Managing Boards do not request the general directors to submit the applications for bankruptcy, the Managing Board chairmen and members and the general directors shall be removed from duty or have their contracts terminated.

7. If the State companies, which are subject to reorganization, dissolution or ownership conversion, fail to carry out the procedures for reorganization, dissolution or ownership conversion, the Managing Board chairmen and members, the general directors shall be removed from duty or have their contracts terminated.

Section 3

FORMS AND CONTENTS OF LABORERS’ PARTICIPATION IN THE MANAGEMENT OF STATE COMPANIES

Article 44. Forms of laborers’ participation in the management of companies

The laborers shall participate in the management of their companies through the following forms and organizations:

1. The general assembly or the congresses of delegates of workers and employees organized in from teams, groups, workshops, sections, boards to companies;

2. The companies’ trade union organizations;

3. The people’s inspection boards;

4. The exercise of their rights to petitions, complaints and denunciations according to law provisions.

Article 45. Contents of laborers’ participation in the management of companies

The laborers are entitled to participate in discussing and commenting on the following issues before the competent authorities make decisions thereon:

1. Orientations, plan tasks, measures for production and business development, reorganization of production in the companies;

2. Schemes on equitization, diversification of ownership of the companies;

3. The companies’ internal rules and regulations directly related to the interests and obligations of laborers;

4. Measures for labor protection, improvement of working conditions, material and spiritual life, environmental sanitation, training and retraining of laborers of the companies;

5. Casting votes of confidence on the chairmen and/or members of the Managing Boards (if any), general directors or directors, deputy general directors or deputy directors, chief accountants, when so requested by competent State bodies;

6. Through the general assembly or congresses of delegates of workers and employees and trade union organizations, the laborers are entitled to discuss and vote to decide on the following issues:

a) The contents of, or amendments and supplements to, collective labor agreements for the representatives of the labor collectives to sign with the general directors or directors of State companies;

b) The regulations on the use of welfare and reward funds as well as plan norms of the companies, which are directly related to the interests and obligations of the laborers in conformity with the State’s regulations;

c) The evaluation of the operation results and programs of activities of the people’s inspection boards;

d) The election of people’s inspection boards.

Chapter V

STATE CORPORATIONS

Article 46. State corporations

The State corporations constitute a form of economic alignment on the basis of self-investment, capital contribution among State companies, between State companies and other enterprises or are formed on the basis of organizing and aligning member units which are bound together in economic benefits, technologies, markets and other business services, operate in one or several principal specialized techno-economic branches with a view to enhancing the business capabilities and obtaining benefits for member units and the entire corporations.

Article 47. Types of State corporation

1. Corporations with investment and establishment decided by the State constitute a form of aligning and rallying independent cost-accounting member companies which have the legal person status and operate in one or several principal specialized techno-economic branches with a view to increasing the capital accumulation and concentration and the specialization of business of member units and the entire corporations.

2. Corporations invested in and set up by companies constitute a form of alignment through investment, capital contribution of large-sized State companies where the State owns the entire charter capital with other enterprises, in which the State companies hold the dominant powers over other enterprises.

3. Corporations which make investment with and deal in the State capital are those established to exercise the owners’ rights and obligations towards State-run one-member limited liability companies converted from independent State companies and State-run one-member limited liability companies set up by themselves; to perform the function of making investment with and dealing in the State capital as well as the owners’ powers and obligations towards the State’s shares and/or contributed capital in enterprises with ownership or legal forms converted from independent State companies.

Section 1

CORPORATIONS WITH INVESTMENT AND ESTABLISHMENT DECIDED BY THE STATE

Article 48. Conditions for organizing corporations with investment and establishment decided by the State

The corporations with investment and establishment decided by the State must fully satisfy the following conditions:

1. Operating in key branches or domains, acting as the core to boost economic growth and making great contributions to the State budget;

2. Member companies operate in one or several principal techno-economic specialized branches, which are closely bound together in technologies, markets and capital;

3. Having at least two corporations in one branch or domain, except for branches or domains where production technologies do not permit the establishment of two or more corporations;

4. Meeting the conditions for establishment of new State companies in Article 8 of this Law;

5. Achieving the objectives of establishment of corporations:

a) Organizing service activities of seeking markets, information, training, research, marketing and other service activities in direct support of the member companies;

b) Creating conditions for technological development, increased capital accumulation and concentration, assignment of specialization, raising the competitiveness of member companies and the whole corporations;

c) Having mechanisms to ensure interests and associate the interests of member companies, which is consented by the member companies.

Article 49. Member units of corporations with investment and establishment decided by the State

The corporations with investment and establishment decided by the State may have the following member units:

1. Units with their charter capital entirely invested by the corporations:

a) Independent cost-accounting member companies;

b) Dependent cost-accounting units;

c) Non-business units;

d) State-run one-member limited liability companies operating under the provisions of the Enterprise Law, converted from the types of member units prescribed at Points a and c, Clause 1 of this Article or newly set up;

e) Depending on business scale and demands, corporations may have members being financial companies;

2. Joint-stock companies and limited liability companies where the corporations hold dominant contributed capital.

Article 50. Capital and assets of corporations with investment and establishment decided by the State

1. The charter capital of the corporations shall include the State capital accounted concentrated at the corporations, the State capital at dependent cost- accounting member companies.

2. The charter capital of independent cost-accounting companies is the State capital invested therein by the corporations. The corporations bear responsibility for the debts and other property obligations of the independent cost-accounting member companies within the amounts of charter capital of such companies.

3. The corporations’ assets formed from their charter capital, borrowed capital and other lawful capital sources invested in independent cost-accounting member companies, non-business units and offices of the corporations.

4. Assets of independent cost-accounting member companies, formed from the charter capital, borrowed capital and other lawful capital sources invested in the companies.

5. The State budget capital can be only invested in the corporations. The corporations are entitled to decide to invest or not to invest it in independent-cost accounting member companies.

6. The corporations shall not transfer their capital and/or assets at member enterprises having the legal person status and their charter capital fully owned by the corporations by mode of non-payment, except for cases of deciding on reorganization of the companies or realizing the target of supplying public-utility products and/or services.

Article 51. Managerial organizations of corporations with investment and establishment decided by the State

1. A corporation is managerially structured to include the Managing Board, the Control Board, the general director, the deputy-general directors, the chief accountant and the assisting apparatus. The functions, tasks, powers and operational organization of the Managing Board, the Control Board, the general director, the deputy-general directors, the chief accountant and the assisting apparatus in the corporation and the internal management of the corporation shall comply with the provisions in Section 2, Chapter IV of this Law and the Government’s regulations.

2. The independent cost-accounting member companies are managerially structured each to have the director, the deputy directors, the chief accountant and the assisting apparatus. The functions, tasks, powers and criteria of the directors, deputy directors, the chief accountants and the assisting apparatuses shall comply with the provisions in Section 1, Chapter IV of this Law and the Government’s guidance; the directors, deputy directors and chief accountants maintain relations with the corporations under the provisions of Clause 1, Article 52 of this Law.

3. State-run one-member limited liability companies and companies where the corporations hold dominant shares or contributed capital portions are managerially organized under the provisions of the Enterprise Law and other law provisions.

Article 52. The relationships between corporations with investment and establishment decided by the State and their member units

1. The independent cost-accounting member companies have the legal person status and business autonomy under the provisions of this Law, other law provisions and their charters approved by the Managing Boards of the corporations; and are bound in rights and obligations to the corporations as follows:

a) They manage and take initiative in using their capital as well as capital invested by the corporations; take responsibility before the corporations for the efficiency of the use of capital and resources invested by the corporations; enjoy financial autonomy and bear civil liability with their entire property;

b) They implement the general business plans of the corporations; perform the production and/or business tasks assigned by the corporations on the basis of the economic contracts; take responsibility for business activities in coordination with the corporations;

c) They enjoy autonomy in signing economic contracts and perform the economic contracts assigned by the corporations;

d) They decide on investment projects as decentralized by the corporations; join the corporations in various forms of investment or are assigned by the corporation to organize the execution of investment projects under the corporations’ plans on the basis of economic contracts signed with the corporations; have the right to invest in, or contribute capital to, other companies;

e) They are entitled to propose the corporations to decide, or are authorized by the corporations to decide on the establishment, reorganization, dissolution or merger of dependent units and decide on the managerial apparatuses of dependent units;

f) After fulfilling tax payment obligations, carrying forwards losses according to the provisions of the Enterprise Income Tax Law, performing other financial obligations according to law provisions, making deductions for setting up the financial reserve funds, they may divide the remaining profits according to the capital invested by the corporations and the capital mobilized by the companies themselves. The profit portions divided according to the capital invested by the corporations shall be used for re-investment to increase the State capital at the companies or form the concentrated funds of the corporations according to the Government’s regulations. The profit portions divided according to capital mobilized by the companies themselves shall be deducted for supplementation to the companies’ development investment funds at the rates prescribed by the Government; the remainder shall be distributed into reward funds and welfare funds under the companies’ own decisions;

g) When being assigned plans, given goods production orders by the State or participating in bidding for performance of public-utility activities, the companies shall have the rights and obligations prescribed in Article 19 of this Law;

h) They submit to the supervision and inspection by the corporations; periodically, accurately and fully report information on themselves and send their financial statements to the corporations;

i) Apart from the bindings to the corporations prescribed at Points a, b, c, d, e, f, g and h, Clause 1 of this Article, the independent cost-accounting member companies are entitled to take initiative in business and performance of obligations of the State companies according to the provisions of this Law.

2. Non-business units shall implement the accounting decentralization regimes prescribed by the corporations, be entitled to create revenue sources from the performance of contracts on service provision, scientific research and training for technology transfer with units within and without the corporations. The non-business units operate according to regulations approved by the Managing Boards of the corporations.

3. The relationships between the corporations and one-member limited liability companies where the corporations own the entire charter capital shall comply with the provisions of Article 57 of this Law.

4. The relationships between the corporations and companies where the corporations hold dominant capital shall comply with the provisions of Article 58 of this Law.

Article 53. Transformation of corporations with investment and establishment decided by the State into corporations invested in and set up by companies themselves

1. The corporations with investment and establishment decided by the State, which satisfy the conditions prescribed in Article 54 of this Law, may be transformed to be organized and operate according to the provisions of Articles 55, 56, 57, 58 and 59 of this Law.

2. The Government shall prescribe the principles, conditions and time limits for transformation of corporations with investment and establishment decided by the State to operate after the model of corporations invested in and set up by companies themselves. Within the transformation period, the corporations set up under the provisions of the 1995 Law on State Enterprises can operate under the provisions in Section 1, Chapter V of this Law.

Section 2

CORPORATIONS INVESTED IN AND SET UP BY COMPANIES THEMSELVES

Article 54. Cases of application of the provisions on corporations invested in and set up by companies themselves

1. The corporations defined in Section 1, Chapter V of this Law, which are reorganized or invest by themselves in other enterprises, meet the requirements on membership structures prescribed in Article 55 of this Law.

2. Large-sized State companies, which have financial potentials, hold technological know how or markets and use the invested financial potentials, technological know how or markets, have invested in and dominated other enterprises, meet the requirements on membership structures prescribed in Article 55 of this Law.

Article 55. Structure of corporations invested in and set up by companies themselves

A corporation invested in and set up by companies themselves is structured to comprise:

1. The State company which holds the powers to dominate other enterprises (hereinafter called the parent company);

2. Member companies (hereinafter called the affiliate companies):

a) State-run one-member limited liability companies whose charter capital is fully held by the State companies;

b) Companies with dominant contributed capital of State companies, including limited liability companies with two or more members, joint-stock companies, companies of joint venture with foreign countries, overseas-based companies; companies with dominant contributed capital of State companies operating according to law corresponding to such types of companies;

3. Companies with portions of non-dominant contributed capital of State companies (hereinafter called associated companies), which are organized in form of limited liability companies with two or more members, joint-stock companies, companies of joint-venture with foreign countries.

Article 56. State companies holding dominant powers over other enterprises

1. State companies holding dominant powers over other enterprises shall have the rights and obligations of the State companies, prescribed in Chapter III of this Law.

2. The managerial apparatuses of the State companies holding dominant powers over other enterprises shall be the apparatuses of the corporations, having the managerial structure, functions, tasks, powers and obligations as prescribed in Section 2, Chapter IV of this Law.

Article 57. The State companies’ relationships with companies where they invest and hold the entire charter capital

The one-member limited liability companies with their entire charter capital invested by State companies shall operate under the provisions of the Enterprise Law. The State companies shall be the owners of such one-member limited liability companies, exercising the rights and performing the obligations of the owners over the one-member limited liability companies according to the provisions of the Enterprise Law.

Article 58. The dominant State companies’ relationships with companies where the State companies hold dominant capital

The State companies holding dominant powers over other enterprises shall manage their dominant shares or contributed capital as follows:

1. Exercising the rights and performing the obligations of shareholders, dominant capital-contributing members through their representatives at enterprises under the provisions of the Enterprise Law, the Law on Foreign Investment in Vietnam, the laws of the countries where the companies invest their capital and the provisions of the charters of the dominated companies;

2. Designating, dismissing, commending, disciplining, deciding on allowances and interests for, their representatives at the dominated enterprises (hereinafter called representatives of the dominant contributed capital portions);

3. Requesting the representatives of the dominant contributed capital portions to report regularly or irregularly on the financial situations, business results and contents of the enterprises where exists dominant contributed capital of the State companies;

4. Assigning tasks to, and requesting the representatives of the dominant contributed capital portions to ask for opinions on important matters of the dominated enterprises before voting thereon; to report on the use of dominant shares or contributed capital in service of the development orientations and objectives of the dominant State companies;

5. Collecting yields and bearing risks from their contributed capital at dominated enterprises;

6. Supervising and inspecting the use of their capital contributed to dominated enterprises.

7. Bearing self-responsibility for the efficiency of the use, preservation and development of their capital portions contributed to dominated enterprises.

Article 59. Relationships between the State companies and enterprises where exist contributed capital portions of the State companies

1. The enterprises where exist contributed capital portions of State companies shall effect their business autonomy under the provisions of law. The relationships between the State companies and the enterprises where exist contributed capital portions of the State companies shall comply with the provisions of law.

2. The State companies shall exercise the rights and perform the obligations of the capital contributors through their representatives at enterprises to which they have contributed capital, in accordance with law and the charters of the enterprises where exist contributed capital portions of the State companies.

Section 3

CORPORATIONS MAKING INVESTMENT WITH, AND DEALING IN,

STATE CAPITAL

Article 60. Corporations making investment with, and dealing in, State capital

1. Corporations making investment with, and dealing in, State capital are special economic organizations having the following functions:

a) To exercise the rights and perform the obligations of owners being the State over State-run one-member limited liability companies transformed from independent State companies; the State’s contributed capital portions at joint-stock companies or limited liability companies with two or more members, which are transformed from independent State companies or newly set up;

b) To perform the functions of making investment with, and dealing in, the State capital at enterprises, which have already undergone the conversion of ownership or legal forms prescribed at Point a, Clause 1 of this Article.

2. Corporations making investment with, and dealing in, State capital shall be set up under the Prime Minister’s decisions.

Article 61. Managerial organization, operation scope, rights and obligations of corporations making investment with, and dealing in, State capital

1. The managerial organization of corporations making investment with, and dealing in, State capital shall comply with the provisions in Section 2, Chapter IV of this Law.

2. The structure, operation scope, rights and obligations of corporations making investment with, and dealing in, State capital shall comply with the Government’s regulations.

Chapter VI

RIGHTS AND OBLIGATIONS OF OWNERS BEING THE STATE OVER STATE COMPANIES AND STATE CAPITAL IN OTHER ENTERPRISES

Section 1

OWNERS AND REPRESENTATIVES OF OWNERS OF STATE COMPANIES AND STATE CAPITAL IN OTHER ENTERPRISES

Article 62. Owners of State companies

The State serves as owners of the State companies. The Government shall uniformly organize the exercise of rights and the performance of obligations of owners over the State companies according to the provisions of this Law and other provisions of relevant legislation.

Article 63. Representatives of owners of the State companies and State capital in other enterprises

1. The following organizations and individuals shall perform the functions of representing the owners of the State companies:

a) The Government shall directly perform the rights and obligations of owners over the State companies as provided for in Clause 1, Article 65 of this Law; the Prime Minister shall directly perform or authorize the concerned ministries to perform a number of rights and obligations of owners over particularly important State companies set up under the Prime Minister’s decisions;

b) The branch-managing ministries and the provincial-level People’s Committees shall act as representatives of owners of the State companies having no Managing Board under the provisions of Article 66 of this Law;

c) The Finance Ministry shall perform a number of rights and obligations of the representatives of owners of the State companies under the provisions of Article 67 of this Law;

d) The Managing Boards are the owners’ direct representatives at the State companies having the Managing Boards and representatives of owners of the companies where they totally invest the charter capital as provided for in Articles 29, 30 and 33 of this Law.

2. The corporations making investment with, and dealing in, State capital shall be the representatives of owners of the companies where they totally invest the charter capital and the representatives of the capital portions they have invested in other enterprises as provided for in Articles 60 and 61 of this Law.

3. The State companies shall be the representatives of owners of the capital portions invested by the companies in other enterprises.

4. The assignment and decentralization of the performance of the rights and obligations of representatives of owners of the State companies shall comply with the provisions in Section 2, Chapter VI of this Law.

Section 2

RIGHTS AND OBLIGATIONS OF OWNERS BEING THE STATE OVER THE STATE COMPANIES

Article 64. Rights and obligations of owners being the State over the State companies

1. The State owners shall have the following rights over the State companies:

a) To decide on the establishment, reorganization, dissolution, ownership conversion of the companies; to decide on the managerial structures of the companies; to select, appoint, dismiss, stipulate the wage and bonus regimes for, the Managing Board chairmen and members, the general directors or directors of the companies; to approve the contents, amendment and supplementation of the companies’ charters;

b) To decide on the objectives, strategies and plan orientations for development of the companies; to decide on investment projects valued at over 30% of the total remaining asset values on the accounting books of the State companies having no Managing Board or smaller percentages prescribed in the companies’ charters; to decide on investment projects valued at over 50% of the total remaining asset values on the accounting books of the companies with the Managing Boards or smaller percentages prescribed in the companies’ charters; decide on borrowing, lending, renting, leasing or other economic contracts in excess of the companies’ charter capital levels; to prescribe the regime of plan assignment, goods order placement or bidding, sale prices, difference subsidies for public-utility product- and/or service- providing companies;

c) To decide on the initial investment capital level, the charter capital level and adjust the charter capital of the companies; to decide on borrowing or lending projects valued at over the level decentralized for the Managing Boards or the directors of the companies having no Managing Board; prescribe the financial regimes of the companies;

d) To inspect, supervise, assess the results of business activities of the companies.

2. The State- owners shall have the following obligations towards the State companies:

a) To invest adequate charter capital for the companies;

b) To abide by the companies’ charters.

c) To bear responsibility for debts and other property obligations of the companies within the limits of the companies’ charter capital;

d) To abide by law provisions on purchase, sale, borrowing, lending, renting and leasing contracts between the companies and owners;

e) To ensure business autonomy, to bear self- responsibility of the companies; not to directly intervene in business activities of the companies;

f) To perform other obligations as provided for by law.

Article 65. Owners’ rights and obligations performed by the Government over the State companies

1. The Government shall directly exercise the rights and perform obligations of owners over the State companies as follows:

a) To approve schemes on establishment, reorganization and restructuring of State companies within the scope of entire national economy, within branches, provinces or centrally-run cities;

b) To decide on or decentralize the decision on investment projects of the State companies; to decide on or decentralize the decision on allocation of initial investment capital, supplementary investment, increase or decrease of charter capital of the State companies; to submit to the National Assembly for ratification the investment projects of the State companies, which fall under the jurisdiction of the National Assembly;

c) To uniformly organize the performance of tasks and powers of owners over the capital portions invested by the State in other companies. To decide on or decentralize the decision on projects for contribution of capital or assets of the State or State companies to joint ventures with foreign investors, the State companies’ projects on investment overseas;

d) To prescribe the financial regimes of the State companies;

e) To inspect and supervise the use of capital at the State companies;

f) To prescribe the regimes of wages, bonuses, subsidies and other interests for the Managing Board chairmen and members, the general directors or directors of the State companies;

g) To prescribe criteria for assessment of business results of the State companies, including the norms on ratio of profits to the State’s investment capital;

h) To prescribe the regime of inspection and supervision of the State companies in the performance of State-assigned objectives and tasks; to evaluate the results of business activities of the companies, managerial activities of the Managing Boards and the administration of the general directors or directors.

2. The Government shall assign and decentralize the performance of owners’ rights and obligations to the following owner- representing agencies and organizations:

a) The ministries and provincial-level People’s Committees as provided for in Article 66 of this Law;

b) The Managing Boards of the State companies as provided for in Article 30 of this Law;

c) The corporations making investment with, and dealing in, State capital as prescribed in Articles 60 and 61 of this Law.

Article 66. Owners’ rights and obligations performed by the branch-managing ministries, provincial-level People’s Committees over the State companies

The branch-managing ministries and the provincial-level People’s Committees shall be the representatives of owners over the State companies set up under decisions of, or authorization to, the ministries or provincial-level People’s Committees, performing the owners’ rights and obligations and representing the owners as follows:

1. To elaborate schemes on reorganization of independent State companies set up under their own decisions for submission to the Prime Minister for approval; to effect the reorganization of State companies according to the schemes already approved by the Prime Minister;

2. To decide on the establishment, reorganization, dissolution, ownership conversion of the State companies; to approve contents, amendment and supplementation of the charters of the State companies. To reach agreement with the Finance Ministry on determination of the initial charter capital level, increase of charter capital of the State companies;

3. To decide on the objectives, strategies and long-term plans of the State companies having no Managing Board;

4. To decide according to competence on investment projects valued at over 50% of the total remaining asset values on the accounting books of the State companies having the Managing Boards or smaller percentages prescribed in the companies’ charters; to decide according to their competence the investment projects valued at over 30% of the total remaining asset value on the accounting books of the State companies having no Managing Board or smaller percentages prescribed in the companies’ charters; to propose the Government to approve the investment projects of the companies, which fall beyond the levels decentralized to the branch-managing ministries or provincial-level People’s Committees;

5. To decide on approval of the plans on use of capital and assets of the State companies to contribute capital to joint ventures with foreign investors; the State companies’ projects on investment overseas; the schemes on the use of capital and assets of the companies to contribute capital to, or buy shares of, domestic companies above the levels decentralized to the Managing Boards or directors of the companies having no Managing Board prescribed in the companies’ charters; approve plans on purchase of companies of other economic sectors;

6. To decide on undertakings to sell assets valued at over 50% of the total remaining asset value on the accounting books of the State companies with Managing Boards or smaller percentages prescribed in the companies’ charters; on the sale of assets valued at over 30% of the total remaining asset value on the accounting books of the State companies having no Managing Board or smaller percentages prescribed in the companies’ charters; the borrowing, lending, renting, leasing of capital or assets with value higher than the charter capital of the State companies having no Managing Board;

7. To decide on selection, appointment, dismissal, regimes of wage, allowance and other interests of the Managing Board chairmen and members; to select, sign contracts or decide on appointment, removal from duty, dismissal, wage level and other interests of directors of independent State companies having no Managing Board; to organize the evaluation of results of operation and management of the companies by the Managing Boards and directors according to the Government’s regulations;

8. To participate in inspection and supervision of the management and use of capital, the distribution of income, the deduction for establishment and use of funds of the State companies;

9. To perform other rights and obligations as assigned or decentralized by the Government.

Article 67. Owners’ rights and obligations performed by the Finance Ministry over the State companies

The Finance Ministry shall perform a number of rights and obligations of owners and owners’ representatives over the State companies as follows:

1. To submit to the Government for promulgation, and organize the implementation of, the regimes of financial management, business accounting, the regimes of reporting and financial publicity of the State companies, the consolidated financial statements of the corporations;

2. To allocate investment capital from the State budget in the following cases:

a) Investment in the establishment of new State companies after the establishment schemes are approved by the Prime Minister;

b) Additional investment to increase the charter capital of the State companies at the proposals of the persons who decide on the establishment of the State companies.

3. To participate in assessment of the results of operation and management of the companies by the Managing Boards and the directors of the State companies according to the Government’s regulations.

4. To organize the inspection and supervision of the management and use of capital, the distribution of income, the deduction for establishment and use of funds of the State companies;

5. To perform other rights and obligations as decentralized by the Government.

Article 68. Responsibilities of the ministers, heads of ministerial-level agencies, heads of Government-attached agencies, presidents of provincial-level People’s Committees

1. To fulfill all rights and obligations of the State-owners, which have been assigned or decentralized thereto.

2. To ensure the business autonomy, self-responsibility of the companies; not to interfere in affairs under the jurisdiction of the Managing Boards, the general directors, directors and managerial apparatuses of the companies.

3. To bear administrative and material liabilities for their own decisions in the performance of delegated powers and assigned tasks; to be responsible for full investment of charter capital in the companies.

4. To bear responsibility or joint responsibility according to law provisions for the following cases:

a) When the companies fail to strictly realize the development objectives, tasks, strategies and/or long-term plans as provided for;

b) Letting corruption, red tape, loss of State property happen in State-invested companies under their management;

c) The State companies’ managerial officials they have appointed cause great damage to the State companies, untruthfully report on the financial situation of the companies;

d) Re-appointing or deciding to transfer to equivalent or higher positions the Managing Board chairmen or members, the general directors, directors of State companies and/or other managerial officials they have appointed, who have violated the provisions at Points a, b, c and d, Clause 3, Article 25, Point e of Clause 5, Clauses 8 and 9 of Article 27, Points b, c and d, Clause 3, Article 32 of this Law.

5. To organize the structuring, transformation of State enterprises according to the overall schemes and plans approved by the Government.

6. To transfer the ownership rights to corporations making investment with, and dealing in, State capital according to the Government’s regulations.

Section 3

RIGHTS AND OBLIGATIONS OF OWNERS’ REPRESENTATIVES OVER THE STATE CAPITAL INVESTED IN OTHER ENTERPRISES

Article 69. State capital invested in other enterprises

State capital invested in other enterprises means the following assorted capital invested in companies other than the subjects defined at Point a, Clause 2, Article 2 of this Law:

1. Capital in money, land use right value or land rents, value of tangible or intangible assets under the ownership of State companies, which are invested in, or contributed to, other companies by the said companies;

2. State budget capital invested in, or contributed to, other companies, assigned to State companies for management;

3. Value of the shares or capital contributed by the State to equitized State companies, one-member limited liability companies or limited liability companies with two or more members;

4. Capital borrowed by State companies for investment;

5. Dividends from capital invested in, or contributed to other companies by the State or State companies, which are used for re-investment in such companies;

6. Capital of other kinds.

Article 70. Rights and obligations in the management of State capital invested in the entire charter capital of other enterprises

1. The ministries, the provincial-level People’s Committees, the Managing Boards of State corporations or State companies shall perform the functions, powers, obligations and responsibilities of owners over State-run one-member limited liability companies where they invest the entire charter capital according to the provisions of the Enterprise Law.

2. The owners’ functions, powers, obligations and responsibilities towards State-run limited liability companies with two or more members and State-run joint-stock companies where agencies, organizations or State companies directly invest or contribute capital shall comply with the provisions of the Enterprise Law.

3. The owners’ representatives nominated to join the Managing Boards, the Members’ Councils, to be general directors or directors of State-run one-member limited liability companies, State-run limited liability companies with two or more members and State-run joint-stock companies must satisfy the corresponding criteria and conditions prescribed in Articles 24, 31, 36 and 39 of this Law.

Article 71. Rights and obligations of the State companies in the management of their capital invested in other enterprises

The State corporations and independent State companies shall have the following rights and obligations over their capital portions invested in other enterprises:

1. To decide on investment, capital contribution; to increase, reduce their investment capital, contributed capital according to the provisions of this Law and the charters of the companies where exists the contributed capital of State companies;

2. To designate, replace, dismiss representatives of the companies’ contributed capital portions according to the provisions of the charters of the companies where exists the contributed capital and the Enterprise Law; to appoint people to join the Managing Boards of joint-venture companies operating under the Law on Foreign Investment in Vietnam (hereinafter called the representatives of companies’ contributed capital portions); to decide on commendation, discipline, allowances and other relevant interests of the representatives of the companies’ contributed capital portions. The expenses for responsibility allowances, rewards and other relevant interests for representatives of the companies’ contributed capital portions shall be accounted into the business expenses or covered by the State companies’ funds. The State companies’ representatives nominated to join the Managing Boards, the Members’ Councils or to be directors of joint-stock companies where the State companies hold the dominant stock capital or contributed capital must satisfy the corresponding criteria and conditions prescribed in Articles 24, 31 and 36 of this Law;

3. To request the representatives of the companies’ contributed capital portions to regularly or irregularly report on the financial situation, the business results and other contents on the companies where exist the contributed capital of the State companies;

4. To assign tasks to and request the representatives of the companies’ contributed capital portions to ask for opinions on important matters of the companies where exists contributed capital of the State companies before voting thereon; to report on the use of dominant shares or contributed capital in service of the State’s development orientations and objectives;

5. To get yields and bear risks from the contributed capital portions at companies. The recovered capital portions, including divided interests thereon, shall be used under decisions of the companies or organizations making investment with and dealing in, capital in service of the business objectives of the companies or organizations. Where the companies are reorganized, the management of their contributed capital portions shall comply with the Government’s regulations;

6. To supervise and inspect the use of contributed capital portions of the companies;

7. To bear responsibility for the efficiency of the use, preservation and development of the contributed capital portions of the companies.

Article 72. Rights and obligations of the representatives of the State companies’ contributed capital portions in other enterprises

The representatives of the State companies’ contributed capital portions at other enterprises shall have the following rights and obligations:

1. To perform the tasks and rights of share-holders, capital-contributing members, joint-venture parties in the companies where exists the contributed capital of the State or State companies. Where State companies hold dominant shares of other companies, the representatives of contributed capital portions shall exercise the rights of dominant shares or dominant contributed capital to direct the companies where exist the dominant shares or dominant contributed capital of the State companies to achieve the objectives set by the State-owners and assigned by the State companies;

2. To stand as, or nominate candidates, to be the State companies’ representatives in the managerial or executive apparatuses of the contributed capital-receiving companies according to the charters of such companies;

3. To monitor and supervise the situation on business activities of the companies where exists the contributed capital of the State companies;

4. To observe the regime of reporting to the Managing Boards, the general directors and the directors of the State companies on the efficiency of the use of the State’s contributed capital at the companies;

In cases where they fail to observe the prescribed reporting regime, abuse the rights to be representatives of the contributed capital portions, show irresponsibility, thus causing damage to the companies and the State, they must bear responsibility therefor and pay compensations for the damage according to law provisions;

5. To ask for the opinions of the Managing Boards, the general directors or directors before joining in the voting at the shareholders’ congresses, at the meetings of the Managing Boards or the Members’ Councils of the companies where exists contributed capital portions of the State companies on the business orientations, strategies and plans, the amendments and supplements to the charters, the increase and reduction of charter capital, profit division, sale of assets of big value, which require voting by shareholders or capital-contributing members. Where many representatives of the State companies join the Managing Boards of the contributed capital-receiving companies, they must discuss together, reach unanimous opinions and ask for opinions on important issues of the companies where exists the contributed capital of the State companies before voting;

6. To bear responsibility before the Managing Boards, for companies having the Managing Boards, or the company directors, for companies having no Managing Boards, for the efficiency of the use of the State’s contributed capital at the companies.

Chapter VII

REORGANIZATION, DISSOLUTION, BANKRUPTCY OF STATE COMPANIES

Article 73. Reorganization of State companies

Forms of reorganization of State companies which do not alter the companies’ ownership shall include:

1. Merger into other State companies;

2. Consolidation of State companies;

3. Division of State companies;

4. Separation of State companies;

5. Transformation of State companies into State-run one-member limited liability companies or State-run limited liability companies with two or more members;

6. Transformation of State corporations with investment and establishment decided by the State into corporations invested and set up by companies themselves;

7. Contracting or lease of State companies;

8. Other forms as provided for by law.

Article 74. Conditions for reorganization of State companies

1. Independent State companies conducting business activities and being on the list of those which the State shall consolidate, develop or maintain 100% ownership may be transformed into State-run one-member limited liability companies or State-run limited liability companies with two or more members.

2. The conditions for reorganization of State companies in forms of merger, consolidation, division, separation shall be prescribed by the Government.

3. The State corporations set up under the 1995 Law on State Enterprises and meeting the following conditions may be transformed, reorganized into the State corporations invested and set up by companies themselves under the provisions in Articles 54, 55, 56, 57, 58 and 59 of this Law:

a) Being on the list of those which the State shall consolidate, develop and continue to maintain 100% State ownership in companies where the State holds dominant powers;

b) Having dominant contributed capital in many other companies or having plans on equitization or sale of member companies of the corporations, sections of the State companies, where, however, the State holds dominant shares or dominant contributed capital;

c) Being engaged in various business lines, of which one is the principal business line; having many dependent units inside and outside the country;

d) Having large capital for investment of capital in other companies;

e) Having the development capability.

The principles and schedules for transformation of State companies shall be prescribed by the Government.

Article 75. Competence and procedures for reorganization of State companies

1. The competence to decide on reorganization of State companies is prescribed as follows:

a) The persons who decide on the establishment of State companies shall organize the elaboration of plans for, and decide on, the reorganization of companies. In case of merger or consolidation of State companies of various ministries, of various provinces or centrally-run cities, or between State companies set up by ministries and State companies set up by provinces or centrally-run cities, the agencies agreed upon shall perform the rights and obligations of owners of the consolidating companies or the merging companies to issue decisions on merger or consolidation of the companies; in case of failure to reach agreement, the agencies having companies to be merged or consolidated may be the co-owners of State-run limited liability companies with two or more members;

b) For cases of reorganization or transformation of corporations, after the Appraisal Councils make proposals and the Prime Minister approves the plans for reorganization of the corporations, the persons who have decided the establishment of the corporations shall decide on the reorganization of the corporations;

c) The Prime Minister shall decide to reorganize important State companies in direct service of defense and/or security.

2. The decisions on reorganization of companies must be sent to creditors and notified to laborers within thirty days as from the date of issuing the reorganization decisions.

3. Where the reorganization of companies leads to the change in legal forms or business objectives and lines, in charter capital, the companies must carry out procedures for re-registration or additional registration with the business registries.

Article 76. Responsibilities of the reorganized State companies

1. For cases of division of companies, the divided companies shall terminate their existence and the new companies shall jointly bear responsibility for the debts not yet repaid, the labor contracts and other property obligations of the divided companies.

2. For cases of separation of companies, the separated companies and the separating companies shall jointly bear responsibility for the debts not yet repaid, the labor contracts and other property obligations of the separated companies.

3. For cases of consolidation of companies, the consolidated companies shall terminate their existence, the consolidating companies shall enjoy lawful interests, bear responsibility for the debts not yet repaid, the labor contracts and other property obligations of the consolidated companies.

4. For cases of merger of companies, the merging companies shall enjoy the lawful interests and bear responsibility for the debts not yet repaid, the labor contracts and other property obligations of the merged companies.

Article 77. Dissolution of State companies

1. The State companies shall be considered for dissolution in the following cases:

a) Upon the expiry of the operation duration inscribed in the establishment decisions and the companies do not apply for the extension;

b) The companies suffer prolonged business losses but have not yet fallen into the state of bankruptcy;

c) The companies fail to fulfill the tasks assigned by the State after they have applied the necessary measures;

d) The maintenance of the companies is unnecessary.

2. The corporations organized and set up by the State and failing to achieve the objectives prescribed in Clause 5, Article 48 of this Law shall have their managerial apparatuses dissolved and be transformed into independent State companies.

Article 78. Decisions on dissolution of State companies

1. The persons who decide on the establishment of State companies shall be entitled to decide on the dissolution of such State companies. The dissolution decisions must be sent to the business registries, creditors and persons with relevant rights and obligations and be notified to laborers in the companies within seven days as from the date of issuance of the decisions to dissolve the companies.

2. The persons who decide to dissolve companies must set up the Dissolution Councils which function to advise the company dissolution deciders on deciding to dissolve the companies and organize the execution of the decisions on company dissolution. The order and procedures for execution of the company dissolution decisions shall be prescribed by the Government.

3. The complaints about dissolution of State companies and the settlement thereof shall comply with the provisions of legislation on complaints and denunciations.

Article 79. Bankruptcy of State companies

The settlement of bankruptcy of State companies shall comply with the provisions of legislation on bankruptcy.

Chapter VIII

CONVERSION OF OWNERSHIP OF STATE COMPANIES

Article 80. Forms of ownership conversion

The State companies shall have their ownership conversed in the following forms:

1. Equitization of State companies;

2. The total sale of State companies;

3. Partial sale of State companies to set up limited liability companies with two or more members, including one member being the representative of the owner of the State capital portion;

4. Assignment of State companies to the labor collectives for transformation into joint-stock companies or cooperatives.

Article 81. Types of State companies subject to ownership conversion

1. State companies operating in branches and domains where the State needs not to hold 100% charter capital shall be subject to the ownership conversion forms prescribed in Article 80 of this Law.

2. The Government shall prescribe the criteria for identification of branches and domains where the State needs not to hold 100% charter capital in enterprises; holds dominant shares or contributed capital; partially holds the capital; does not hold the State capital; types of State companies to be assigned or sold to labor collectives of the companies.

3. The Prime Minister shall decide on the list, classification, plans for, and forms of ownership conversion, of State companies.

Article 82. Objectives of ownership conversion of State companies

The ownership conversion of State companies aims:

1. To restructure the ownership of State companies where the State needs not to continue holding 100% of their charter capital so as to use more efficiently the assets invested by the State in the companies;

2. To additionally mobilize sources of investment capital of individuals and organizations inside and outside the companies in order to form companies with various sources of owners’ capital for investment in production expansion, technological renewal, higher competitiveness of the companies;

3. To create conditions for laborers to contribute capital and become the real masters of the companies and have jobs.

Article 83. Competence to select companies, to approve ownership conversion plans, approve companies’ values and to decide the ownership conversion

1. Basing themselves on the provisions of Article 81 of this Law, the ministers, the heads of ministerial-level agencies, the heads of Government-attached agencies and the presidents of provincial-level People’s Committees shall select and decide forms of ownership conversion of State companies.

2. The ministers, the heads of ministerial-level agencies, the heads of Government-attached agencies and the presidents of provincial-level People’s Committees shall organize the valuation of the companies; decide on the values of the companies and approve plans for ownership conversion of companies under their respective management. The adjustment of companies’ values to be lower than the values inscribed in the accounting books shall be guided by the Government.

3. The order and procedures for ownership conversion of State companies shall be stipulated by the Government.

Article 84. Rights of ownership-converted companies

1. To enjoy preferences prescribed for newly set up companies under the provisions of legislation on investment encouragement.

2. To be exempt from registration tax on conversion of ownership over the assets of the State companies into the ownership of share purchasers, company purchasers.

3. To be entitled to continue with the land rent contracts of the former companies under the provisions of land legislation.

4. To be entitled to continue borrowing capital at commercial banks, financial companies and/or other credit institutions of the State according to the mechanism and interest rates applicable to State companies within the time limits prescribed by the Government.

5. Purchasers of State companies which have suffered prolonged losses are entitled to price discount if they continue to maintain the companies for production and business, re-employ the entire laborers of the companies and ensure jobs for them within the time limits prescribed by the Government, except for cases where laborers voluntarily terminate their labor contracts. The price discount levels shall be prescribed by the Government.

6. Other interests and preferences as prescribed by law.

Article 85. Rights of laborers in ownership-converted State companies

The laborers in the ownership-converted State companies shall have the following rights:

1. To maintain and develop welfare funds in kind under the ownership of the labor collectives, which are managed by trade union organizations of the companies;

2. To be entitled to use the welfare funds and reward funds in money (if any) divided to laborers for purchase of shares;

3. To be given priority in purchase of the companies, purchase of shares under the Government’s regulations;

4. Other interests as prescribed by law.

Article 86. The State’s guarantee for share purchasers, State-company purchasers or assignees

The ownership rights and all legitimate rights of organizations and/or individuals that buy shares at the equitized companies, buy or are assigned companies shall be protected by the State according to law provisions.

Chapter IX

STATE MANAGEMENT OVER STATE ENTERPRISES

Article 87. Contents of the State management over State companies

1. To promulgate, and organize the implementation of, legal documents on the State enterprises and other relevant legal documents.

2. To elaborate plannings and strategies for development of State companies according to the orientations and objectives of the strategies, plannings and plans for socio-economic development, branch development and territorial development.

3. To organize business registration for the State companies; to build up and store basic information on the State companies; to monitor and supervise business operation of the State companies after registration; to ensure that the State companies operate strictly under the conditions prescribed in the establishment decisions and business registrations according to law provisions.

4. To draw up plannings and organize the training, professional fostering, raising of business ethical qualities for managers of the State companies, the political and moral qualities as well as professional qualifications for officials performing the State management over the State companies; to train and build up the contingents of skilled workers.

5. To promulgate lists of products, financial management modes and preferential policies for public-utility products and services in each period.

6. To inspect and examine the implementation of law, policies and regimes of the State in the State companies; to settle complaints and denunciations and handle violations according to law provisions.

Article 88. Agencies performing the State management over State companies

1. The Government shall exercise the uniform State management over State companies; prescribe the responsibility assignment and coordination among ministries, ministerial-level agencies, Government-attached agencies as well as the decentralization and coordination among the People’s Committees at all levels in performing the tasks of State management over the companies.

2. The ministries and ministerial-level agencies shall perform the State management over State companies according to their respective functions and domains put under their respective charge.

3. The provincial/municipal People’s Committees have the responsibilities:

a) To perform the State management over State companies within their respective localities according to law provisions;

b) To organize business registration; to inspect, examine and supervise activities of the State companies within their respective localities;

c) To guide and direct the People’s Committees of rural districts, urban districts, provincial capitals or towns in the coordinated performance of the State management over State companies.

Article 89. Auditing and inspection of business activities of State companies

1. The annual financial statements of the State companies must be audited; the auditing regime shall comply with the law provisions on audit.

2. The inspecting agencies shall inspect business activities of the State companies strictly according to their functions and competence and comply with the law provisions on inspection.

The inspection of one matter or case shall be effected no more than once in a year against a State company. The inspection duration shall not exceed thirty days; in special cases, the inspection duration shall be extended under decisions of competent State bodies, but for not more than thirty days.

The irregular inspection shall be conducted only when there are grounds on law violations by companies.

When conducting inspection, there must be decisions of the competent persons; upon the termination of inspection, there must be records and conclusions on the inspection; heads of the inspection teams are responsible for the contents of the inspection records and conclusions.

The persons who issue inspection decisions in contravention of law or abuse the inspection to seek personal benefits, harassing for bribes and/or causing troubles for operations of the companies shall, depending on the nature and seriousness of their violations, be disciplined or examined for penal liability; if causing damage, they must pay compensations therefore according to law provisions.

Article 90. State management over other State enterprises

1. The State management over State-run one-member limited liability companies, State-run limited liability companies with two or more members and State-run joint-stock companies shall comply with the provisions of the Enterprise Law and the Government’s regulations.

2. The State management over the joint-stock companies and the limited liability companies with the State’s dominant shares or contributed capital shall comply with the provisions of the Enterprise Law.

Chapter X

COMMENDATION AND HANDLING OF VIOLATIONS

Article 91. Commendation

Organizations, individuals and State companies, that record outstanding achievements in business, raising the efficiency and competitiveness of the companies, making great contributions to national construction, defense and development shall be commended and/or rewarded according to law provisions.

Article 92. Handling violations committed by State companies or economic organizations

1. Those State companies which commit the following acts of violation shall, depending on the nature and seriousness of their violations, be suspended from operation or administratively sanctioned according to law provisions:

a) Setting up State companies not according to the provisions of this Law;

b) Failing to make business registration, doing business not in accordance with the registered lines or without permission of competent State bodies;

c) Failing to implement the tasks and objectives prescribed by the State;

d) Seriously violating other provisions of this Law.

2. Economic organizations operating in the name of State company without establishment decisions shall be suspended from operation and have their property confiscated and remitted into the State budget.

Article 93. Handling of violations committed by individuals

Individuals who commit the following acts of violation shall, depending on the nature and seriousness of their violations, be disciplined, administratively sanctioned or examined for penal liability; if causing damage, they must pay compensations therefore according to law provisions:

1. Failing to fulfill their responsibilities and powers authorized by owners of State companies or making erroneous decisions which cause damage to the companies;

2. Deciding to set up State companies not in accordance with the prescribed procedures and order or ultra vires, showing irresponsibility in appraising the establishment thereof, thus leading to inefficient operations of the companies;

3. Failing to properly implement the policies towards laborers in the State companies;

4. Interfering in affairs which fall under the jurisdiction of the companies; harassing companies, requesting companies to provide resources not prescribed by law;

5. Violating other provisions of this Law.

Chapter XI

IMPLEMENTATION PROVISIONS

Article 94. Implementation effect

1. This Law takes implementation effect as from July 1, 2004.

2. This Law replaces the 1995 Law on State Enterprises.

3. State enterprises which have been set up and registered their business under the provisions of the 1995 Law on State Enterprises must not carry out procedures for the establishment and business registration under the provisions of this Law; State enterprises with their operation charters being incompatible with the provisions of this Law shall, within ninety days as from the effective date of this Law, have to amend and supplement their charters to conform to the provisions of this Law.

State corporations and independent State enterprises, which have been set up before the effective date of this Law and fail to satisfy the conditions prescribed by this Law for State corporations or independent State companies, must be reorganized, dissolved or have their ownership converted according to the Government’s regulations.

Article 95. Implementation guidance

The Government shall detail and guide the implementation of this Law.

The Government shall assign the competent agencies to coordinate with Vietnam Labor Confederation in guiding the organization and operation of the Congresses of public servants in the State companies and the laborers’ participation in the management of companies according to the provisions of this Law.

This Law was passed on November 26, 2003 by the 11th National Assembly of the Socialist Republic of Vietnam, the 4th session.